Published in Standard-Examiner, September 24,
2014, Ogden, Utah
By VIJAY K.
MATHUR
There is a misunderstanding among many Americans that in today’s
economy, those who wish to get a good high-paying job must get a bachelor’s
degree. Colleges and universities further confirm this misunderstanding. They
emphasize higher average salaries of bachelor’s and/or higher degree holders as
compared to those with associate’s degrees and high school graduates, even
though there are vast differences in salaries across disciplines for bachelor’s
and/or higher degrees.
Data show that high school graduates with technical training and
experience would earn more than some college graduates with four-year degrees
in arts and humanities. I do not intend to discourage arts and humanities
majors. However, many high school graduates would be well advised to pursue
some technical training in marketable skills if their goal is to get well-paid
jobs. Their net benefit from a bachelor’s degree after six years with
overloaded debt, in a discipline with poor labor market demand, would be
minimal.
The 2014 study at the Federal Reserve Bank of New York (NY Fed),
by Jaison Abel, Richard Deitz and Yaquin Su (www.newfed.org) illustrates well
the transformation in the labor market environment for college graduates. They
find that even though college grads (with bachelor’s degree or higher) as a
group have half the unemployment rate of all workers, the unemployment rate of
recent college graduates is much higher than all college graduates from
1990-2013. A tough unemployment rate for college graduates tends to decline
with age from late 20s to late 30s, but it significantly increased during 2009
-11 as compared to 1990-2000.
The NY Fed study also finds that the underemployment rate
(percentage of college grads working in jobs that do not require a college
degree) for all college graduates is around 33 percent and close to 44 percent
for recent college graduates in 2012. A significant fraction of underemployed
in both groups is earning higher salaries and/or wages in career-oriented
skilled jobs such as electricians, dental hygienists, and mechanics, with
average salary of $45,000 in 2012. They earn more than the salary of many
(close to 15 to 30 percent premium in 2012) with bachelor’s degrees in low-wage
jobs.
Abel and Deitz, in another study at NY Fed, Sept. 4, 2014, find
that annual wage of bachelor’s degree holders at the bottom 25 percent of the
wage distribution is the same as for high school graduates. But data on rate of
return of college education based on averages could confuse many. For example,
some rough estimates on the rate of return (net of cost of education) generated
by Abel and Deitz show that on average a bachelor’s degree earns 15 cents and
associate’s degree earns 12 cents on $1 of investment. However, as expected,
majors in engineering, math and computers or health sciences earn much more
than majors in social sciences or education.
For many high school graduates who are not fully prepared for
college, a better option would be to attain an associate degree to acquire
marketable skills. According to the Utah Education Task Force Report, May 22,
2013 (le.utah.gov) 18 percent of full-time and 17 percent of part-time students
were in remedial courses in Utah’s four-year USHE Institutions in 2010-11.
Total completion rate for first time students at a four-year public institution
over six years is 32.21 percent, almost half the rate for the nation as a
whole. This is not an efficient use of resources in higher education in Utah.
The Wall Street Journal reported, Sept. 12, 2014, that U.S.
manufacturers are having a difficult time filling positions in skilled trades
in 2014. To meet this skilled gap, President Barack Obama and some state
governors want to implement German-style apprenticeship programs. Apprentices
would work at jobs for pay and train for a broader range of skills,
transferable to other jobs. For many high school graduates, a more rewarding
and cost-effective strategy to earn a good wage would be to obtain an
associate’s degree in marketable skills. This strategy will also lighten their
debt burden and give them work experiences. They can always pursue higher
education in the future if they so desire.
It is time to think of a different strategy for providing the
workforce for the future. Simply said, all high school graduates going to
four-year institutions to obtain bachelor’s degrees is not a cost-effective and
welfare-maximizing strategy. Professors Frank Levy and Richard Murnane of
Harvard University report in “Dancing with Robots” that since 1980, due to
technological revolution, routine manual and other work tasks are declining.
Work tasks that require non-routine manual skills, skills to work with new
information, and abilities to solve unstructured problems are increasing.
Getting a four-year bachelor’s degree will not assure a
promising work future for many. It is hoped that higher education institutions
are ready for challenges in education and to prepare students to develop human
capital to meet the demands of new technologies and information infrastructure.
Mathur is former
chairman and professor of economics and now professor emeritus, Department of
Economics, Cleveland State University, Cleveland, Ohio. He also writes online
for Standard-Examiner at http://www.standard.net/Guest-Cpmmentary. He lives in Ogden.
